Professional Documents
Culture Documents
1.0
INTRODUCTION
1.1
Like all organization, non- profit organizations vary much it terms of mission, size mode of
operation and impact, particularly in a cross national sense. Some are closer to the model of a
government agency, other may indeed resemble the business firm, and yet others may be little
more than an informal network. These variations not withstanding however, there is an
emerging consensus among researches in the field that non profit organization have the
following core characteristic (Salamon and Anheir, 1997).
a) Non- profit distributing not returning any profit generates to owner or equivalents,
which distinguish non -profit from business.
b) Voluntary- being non-compulsory in nature and with some degree of voluntary input
either the agencys activities or management.
c) Organised- processing some institutional reality, this separates the organization from
informal entities such as families, gatherings or movement.
With this definition at hand, we can then ask if the non profit form is intrinsically
associated with distinctive features that lead to characteristic behaviour and outcomes. In fact,
many writers have made such claims:, Kramer (1981) sees the essence of voluntary agencies,
Hudson (1999) and Paton (1996) identify the value orientation of non-profit organization as
their essential feature, Tonkiss and Passey (1999) suggests that trust and voluntarism are at
the centre of non profit organization. Billis (1989) sees ambiguity as the essence of most
non-profit organization, and Lohmann (1989) finds that the notion of the common is the key
to understanding this type of organization.
We buy goods of daily consumption from the general store of your locality, such as
clothes from cloth shop or we can see a movie in a cinema hall. These are all business
organisation that deal in purchasing and selling goods and services. Their aim is to earn
profit. But we go to hospital for the treatment, and also a member of a sports club of our area.
WWF stands for World Wide Fund for nature. It was formerly known as the World Wild Life
Fund adopted its current name to show that is also works on other environmental issues and
not just wild life. WWF is one of the worlds largest conservation organizations. WWF is an
independent foundation registered under Swiss Law. WWF is also a non- profit organisation.
WWF Malaysia has come a long way since its coming into being on the 13 th January
1972. In the early days we had solely focused on wild life conservation such as saving
endangered species like the tigers and the turtles, today their work has extended to encompass
marine and forest conservation as well, from to protecting our highlands and forests and also
our rivers and seas.WWF Malaysia began as a humble two person organisation. But, today
they have close to 200 people working with them from Kedah to Sabah. Also known as
Tabung Alam Malaysia, we are governed by a Board of Trusted. Their conservation work
focuses on species, forests, and fresh water, marine and environmental education.
From high up in the mountain tops to down low at the bottom of the sea, WWF Malaysia
is working hard to help protect the countrys natural environment through our various
conservation programmes. WWF Malaysia focuses its conservation work on large scale
priority areas that encompass a broad range of wild life and ecological systems. The ultimate
goal is to achieve long term and sustainable conservation impact in the country by
conserving, restoring and protecting a diversity of species, forest, marine, coastal and fresh
water environmental. For a living planet for us, for our children and the generation to come.
Nature of a non profit organization is to serve the public for a defined purpose, without
being profit oriented. The establishment of such an organization is not for business or for
individuals to shield their assets or avoid payments of income taxes. They are permitted to
make profits, provided profits are channelled to the specific needs that are approved by the
tax regulatory body of the country.
For example, in WWF works to strengthen communities ability to conserve the natural
resources they depend upon. We help them secure the rights; capacities and knowledge they
need to strengthen their role as stewards of the environment, and improve their live hoods and
health. We also promote innovation, learning and implementation of strategies to expand
community conservation across longer landscapes. This include
a) Facilitating links across communities
b) Building capacity of support institutions
c) Promoting policy framework for community tenure decentralized governance and
sustainable live hoods.
Besides that, WWF also in social activities without expecting any revenue or gain from
that. For example, empower women and improve health for girls and women. Girls and
women often play a central role in nature resource management and use collecting forest
products for food, medicine and firewood and water for their families. WWF help them gain
better access to education and health services such as improving drinking water, vaccinations
and family planning so they can improve their lives and helps lead environment change in
their families and community.
When we talk about WWF future, they work globally with every sector at every level. To
accomplish our ambitious goals, WWF work to educate and influence people into making
sustainable choices and decision around the use of natural resources and those who work in
government and set policy that impacts nature. They work globally at every level in the field
and in the local community, from the halls of government to the global market place. One of
WWFs strength is our ability to engage stakeholders in business, civil society and academia.
Working together with 1.1 million supporters, WWF partners, project and experts are making
a difference in creating a healthy future for our plant.
In Malaysia, there is no specific accounting standard for the NPOs to prepare their especially
related with the reporting and disclosure requirements. However, NPOs are encouraged to
comply with the International Financial Reporting (IRFS) issued by International Accounting
Standard Board and adopted by the Malaysian Accounting Standard Board (MASB) or
reporting standards applicable for private entities (PERS) in the preparation and presentation
of their financial statement. Besides that, a number of act and standard that bound the NPO
but subject to several factors like type and nature of NPO and registration are the Societies
Act 1996, the Company Act 1965, Trustees (Incorporation) Act 1952, Income Tax Act 1961
and Statement of Financial Account Standard 116.
Under Financial Accounting Standard Board (FASB) 117, financial statement of non
profit organization, the establishment of standard for general purpose external financial
statement provided by a non- profit organization. This statement requires that all non- profit
organization provide a statement of financial position, a statement of activities, and a
statement of cash flows. This statement also requires classification of an organizations net
assets and its revenue, expenses, gains and losses based on the existence of absence of donor
imposed restrictions. It requires that the amounts for each of three classes of net asset :permanently restricted, temporarily restricted and unrestricted. This statement amends FASB
statement No 95 statement of cash flows, to extend its position to non- profit organization and
to expand its description of cash flow from financing activities to include certain donor
restricted cash that must be used for long term purposes.
Under Financial Accounting Standard Board (FASB) 116, standards for general-purpose
external financial statementsprovided by a non profit organizations. It specifies that those
statements include astatement of financial position, a statement of activities, and a statement
of cash flows. ThisStatement also amends FASB Statement No. 95, Statement of Cash Flows,
to extend itsprovisions to non profit organizations. It also specifies that voluntary health and
welfare organizations continue to provide a statement of functional expenses, which is useful
inassociating expenses with service efforts and accomplishments of non profit organizations.
ORGANISATION
In World Wide Fund (WWF) for Nature Malaysia which is WWF is NPO, they should
prepare generally all NPO need to prepare a complete set of annual account based on MASB
standard, that consists of statement of financial, income and expenditure statement, cash flow
statement, notes to account and trading account. Statement of Financial Position summarizes
the assets, liabilities and net assets of the organization at a specified data. It is a snapshot of
the organisation financial position on that date.
Statement of activity (also called an income and expenses statement), this reports the
organisations financial activity over a period of time. It shows income minus expenses,
which results in either a profit or loss. Statement of cash flow summarizes the resources that
become available to the organisation during the reporting period and the uses made of such
resources. It is especially useful in real time because it reports income that has been received
and expenses that have been paid.
Statement of projected cash flow is helpful for the board and the organization to be
able to anticipate any shortfalls for planning purposes. Statement of functional expenses
reports all expenses as related either to program services or to supporting services. Expenses
under program services are shown dividend among the various programs. Expenses under
supporting services are generally divided between (1) management and general expenses and
(2) fundraising expenses.
According to the MASB standard, each component in the financial statement shall be
identified clearly. In addition, the following shall be displayed prominently and repeated
when it is necessary for a proper understanding of the information presented:
a) The name of the reporting organization or other means of identification, and any
change in that information from the proceeding balance sheets date
b) The balance sheet date or the period covered by the financial statements, whichever is
appropriate to that component of the financial statements
c) The presentation currency
d) The level of rounding used in presenting amounts in the financial statements.
PROFIT ORGANISATION
According to Financial Accounting Standard Board (FASB), there are two Statement of
Financial Accounting Standards need to be following by Non-Profit Organization (NPO)
which is standards No. 116 and 117. It also known as FASB116 and FASB117. Under FASB
116, there are 8 paragraph explain about the requirement that need to be comply by every
NPO which are paragraph 8 (Contributions Received), 14-16 (Reporting by Not-for-Profit
Organizations), 17 (Expiration of Donor-imposed Restrictions), 20 (Measurement at Fair
Value), 29 (Effective Date and Transition).
FASB117 focus on the statement need to be prepared by NPO. There are 3 statements
including Statement of Financial Position (paragraph 916), Statement of Activities
(paragraph 1728) and Statement of Cash Flows (paragraph 2930).
5.1
10
11
12
World Wide Fund (WWF) Malaysia is one of the non profit organisation (NPO) in Malaysia,
so they needs to prepare their own financial statements as a company financial reporting. In
Malaysia, Malaysia Accounting Standard Board (MASB) did not have a specific accounting
standard for the NPO especially related to the requirement of presentation and disclosure.
However, NPO are encourage to comply with the International Financial Reporting Standards
(IFRS) issued by the International Accounting Standard Board and adopted by the MASB or
reporting standards applicable for private entities in the preparation and presentation of their
financial statements.
According to Statement of Financial Accounting Standards No.116,(June 1993) this
Statement establishes standards of financial accounting and reporting for contributions
received and contributions made. Accounting for contributions is an issueprimarily for non
profit organizations because contributions are a significant source ofrevenues for many of
those organizations. However, this Statement applies to all entities(non profit organizations
and business enterprises) that receive or make contributions. ThisStatement also establishes
standards for recognizing expirations of restrictions on contributionsreceived and for
accounting for collections of works of art, historical treasures, and similarassets acquired by
contribution or by other means.
According to Statement of Financial Accounting Standards No.117,(June 1993) this
Statement establishes standards for general-purpose external financial statementsprovided by
a non profit organizations. It specifies that those statements include astatement of financial
position, a statement of activities, and a statement of cash flows. ThisStatement also amends
FASB Statement No. 95, Statement of Cash Flows, to extend itsprovisions to non profit
organizations. It also specifies that voluntary health and welfare organizations continue to
provide a statement of functional expenses, which is useful inassociating expenses with
service efforts and accomplishments of non profit organizations.
13
14
Statement of Activities
15
17
18
19
20
position, the statement of income and expenditure and statement of receipts and payments.
The notes to the financial statements often provide several pages of information regarding the
nature of the nonprofit's activities as well as a summary of its significant accounting policies.1
1Notes of Financial Statement for WWF for Nature Malaysia attach in appendices.
21
Introduction
Every not-for-profit organizations (NPO) are requires to comply all the requirement by
FASB117 and FASB 116.
nonprofits in more than 20 years. FASB116 are dealing with contributions made and
received, and FASB 117 dealing with financial statement format. Compliance with both
standards is required for years ending December 31, 1995 and beyond, with an optional one
year delay for small organizations which are those with annual expenditures under
$1,000,000 and total assets less than $5,000,000.
FASB 117 requires that all not-for-profit organizations provide a statement of
financial position, a statement of activities, and a statement of cash flows. It requires
reporting amounts for the organization's total assets, liabilities, and net assets in a statement
of financial position; reporting the change in an organization's net assets in a statement of
activities; and reporting the change in its cash and cash equivalents in a statement of cash
flows.
FASB 116 requires not-for-profit organizations to distinguish between contributions
received that increase permanently restricted net assets, temporarily restricted net assets, and
unrestricted net assets. It also requires recognition of the expiration of donor-imposed
restrictions in the period in which the restrictions expire.
7.2
Purpose of Analysis
The purpose of the analysis is to determined the level of compliance for presentation and
disclosure of financial statements by not-for-profit organizations (NPO) that required by
FASB 117 and FASB 116. Whether the organisation presenting their financial statements by
complying the requirements that have been stated in FASB 117 and FASB 116. It is
determined whether that industry had been complied just for the certain items only or all of
the requirements. The other purpose for this project is also to understand the special
requirements or items of presenting and disclosure in financial statements for the NPO
which is different from athe industry. It is also to analyze the presentation and disclosure
practiced by the selected company which is World Wide Fund (WWF) Malaysia.
22
Index of Analysis
7.3.1 Financial Accounting Standard Board (FASB) 116
FASB
116
PARA
8
Items
Requirement
WWF
Comply
CONTRIBUTIONS
(Disclosure)
Contributions received
Contributions were
WWF comply
RECEIVED
by not-for-profit
reported as
the requirement
organizations shall be
unrestricted and
reported as restricted
restricted
support or unrestricted
PARA
14
REPORTING BY
support
A not-for-profit
Contributions were
WWF comply
NOT-FOR-
organization shall
reported as
the requirement
PROFIT
distinguish between
unrestricted,
temporarily
with permanent
restricted and
restrictions, those
permanently
restricted.
EXPIRATION OF
imposed restrictions.
A not-for-profit
Donor-imposed
WWF comply
DONOR-
organization shall
restriction expired
the requirement
IMPOSED
RESTRICTIONS
of a donor-imposed
restriction on a
or fulfilment of a
contribution in the
specific pragmatic
purpose
restriction expires. A
restriction expires when
the stipulated time has
elapsed, when the
stipulated purpose for
which the resource was
23
MEASUREMENT
fulfilled, or both.
Not-for-profit
WWF comply
20
AT FAIR VALUE
organizations shall
increase
the requirement
EFFECTIVE
29
DATE AND
have any
TRANSITION
extraordinary items
a change in accounting
2013.
WWF comply
the requirement
captions "extraordinary
unrestricted net
assets," "change in
"change in unrestricted
temporarily
temporarily restricted
and "change in
permanently
in permanently
restricted net
assets.".
24
PARA
89
Requirement
Items
WWF
(Disclosure)
STATEMENT OF Statement of financial
In WWF Malaysia,
FINANCIAL
position is to provide
typically current
POSITION
relevant information
about an organization's
original maturities of
relationships to each
sundry receivables
other at a moment in
time.
STATEMENT
year.
Liabilities that are
OF FINANCIAL
classified as current
POSITION
include sundry
required by generally
payables is to be
accepted accounting
principles, is a common
year.
Comply
WWF comply
the requirement
WWF comply
the requirement
PARA
STATEMENT
organizations.
Relevant information
WWF is subject to
WWF comply
OF FINANCIAL
the requirement
POSITION
services coverage
liabilities cannot be
adequately
communicated solely by
limitations with
classification methods,
respect to incurrences
of
noncurrent, or by
Indebtedness,
sequencing information
consolidations and
in financial statements.
assets.
WWF Malaysia this
STATEMENT
WWF comply
25
OF
statement of activities is
report known as
ACTIVITIES
to provide relevant
Statement of Income
information about:
(a)the effects of
revenue, expenses,
(b)the relationships of
year
the requirement
circumstances to each
other, and
(c) how the
organization's resources
are used in providing
various programs or
PARA
24
PARA
26
STATEMENT
services.
Statement of activities
OF
comply the
ACTIVITIES
requirement
STATEMENT
expenses
Voluntary health and
OF
welfare organizations
comply the
ACTIVITIES
requirement
information as well as
information about
expenses by their natural
PARA
31
STATEMENT
classification,
The financial statements
The Statement of
OF CASH
Receipts and
FLOWS
WWF comply
the requirement
26
beginning financial
year and end of
financial year.
7.4
Items
Contribution Receive
Reporting By Not-For-Profit Organizations
Expiration Of Donor-Imposed Restrictions
Measurement At Fair Value
Effective Date And Transition
Compliance
/
/
/
/
/
FASB 117
Para 9
Para 89
Para 91
Para 17
Para 24
Para 26
Para 31
Items
Statement Of Financial Position
Statement Of Financial Position
Statement Of Financial Position
Statement Of Activities
Statement Of Activities
Statement Of Activities
Statement of Cash Flow
Compliance
/
/
/
/
X
X
/
27
FASB 116
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
FASB 116
Comply; 500.00%
Not comply
FASB 117
5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
FASB 117
Comply; 500.00%
Comply
Not comply
28
Conclusion
From the analysis that had been made, we can conclude that, WWF comply majority of
reiurement made by FASB 117 (71.43%), and fully comply with FASB 116. It made the
users of the financial statement get enough information and easy for them to made decision
especially to increase the fund to the organisation. Besides that, the impact of FAS 116 and
117 is so extensive that all levels of operations at a nonprofit will be affected. It not just the
accounting office but all the related parties. For example, development officers will need to
know the exact terms of contributions in order to correctly record them under the new
standards, legal assistance may be needed to determine the proper treatment for endowment
fund gains and losses, and computer assistance may be required to accommodate the new
reporting requirements.
29
CONCLUSION
We can conclude that World Wide Fund (WWF) For Nature Malaysia the financial statements
company are mostly complied with the disclosure requirements as stated in the specific
Financial Accounting Standard Board (FASB) 116 and 117 discussed earlier except for
certain disclosure. To the extent practicable and applicable, the information in the financial
statements are presented and disclosed in accordance to the FASB 116 and 117. The required
information is either being disclosed in the financial statements or in the notes to the financial
statements or both. The disclosures enable us to identify the changes, material matters or
events and the significant risk faced the companies. But still, some of the disclosure
requirements in the specific FASB 116 and 117 are not applicable in the financial statements
of WWF. There are some circumstances that WWF not fully follow the requirement but still
comply most as stated by FASB 116 and 117.
As a conclusion, financial statements should be prepared in accordance to the
standards. Otherwise, the Non Profit Organisation (NPO) did not have a specific standard
provide by Malaysian Financial Reporting Standard (MFRS) so NPO needs to follows the
standard provide by FASB. The information provided will tend to mislead the users to make
wrong decisions and take inappropriate actions. FASB set out the disclosure requirements
with the objective to enhance the understandability, reliability, comparability and relevance of
the financial statements. The financial report which complies with the disclosure
requirements will provide a true and fair view and it is useful in assisting the users to make
decisions.
30
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33